Peter invests $100,000 in a 3-year certificate of deposit earning 3.5% at his local bank. Which time value concept would be used to determine the maturity value of the certificate? A. Future value of an ordinary annuity.
B. Future value of one.
C. Present value of an annuity due.
D. Present value of one.

B. Future value of one.

Explanation:

An annuity would be used had there been a series of equal deposits or cashflow investments made by Peter over the 3 years. He only made one investment therefore this is not an annuity which cancels out options A and C.

Maturity date is 3 years into the future so this is a future value concept not a present value one. Future value of one is the correct time value concept to use here.

The value at the end of the three years by the way is;

= 100,000 * ( 1 + 3.5%)³

= $‭110,872

a. money supply  

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